Commenting on the anticipated stimulus package getting and today’s trading Gorilla Trades strategist Ken Berman said:
Q4 2019 hedge fund letters, conferences and more
Welcome to our latest issue of ValueWalk’s hedge fund update. Below subscribers can find an excerpt in text and the full issue in PDF format. Please send us your feedback! Featuring Point72 Asset Management losing about 10% in January, Millennium Management on a hiring spree, and hedge fund industry's assets under management swell to nearly Read More
S&P 500 Hits New Lows
While the relatively strong Nasdaq barely lost ground today, the Dow and the S&P 500 hit new bear market lows with especially the financial sector dragging the benchmarks down. The S&P 500 and the Dow hit their lowest levels since late-2016 as the woes regarding the financial sector’s profitability got stronger in the wake of the Fed’s unprecedented move, causing an exodus out of the shares of large-cap banks.
The major indices all finished lower following another chaotic session on Wall Street, as despite the Fed’s ‘unlimited’ quantitative easing (QE) program, investors remained defensive due to the rapid spread of the virus and the Senate’s failure to pass a massive stimulus bill. The Dow Jones Industrial Average (INDEXDJX:.DJI) was down 582, or 3.0%, to18,592, the Nasdaq (INDEXNASDAQ:.IXIC) lost 19, or 0.3%, to 6,861, while the S&P 500 (indexsp:.inx) fell by 68, or 2.9%, to 2,237. Decliners outnumbered advancing issues by an almost 3-to-1 ratio on the NYSE, where volume was extremely high again.
The COVID-19 Crisis
The COVID-19 crisis entered its ‘U.S. phase’ over the weekend, with the East Coast reporting a huge jump in confirmed cases for three days in a row, and with several states announcing restrictions. Tomorrow, well over one-third of the country will be under some kind of lockdowns and the situation in Europe also remains gloomy. The total number of cases crossed 350,000 today, and since only Asia has been reporting steadily improving numbers, the global economic uncertainty remains very high, even considering the coordinated interventions.
Gold was the clear winner of today’s historic session, as the precious metal surged by the most in over a decade on the Fed’s incredible monetary expansion, boosting the shares of gold miners as well. Treasury yields plunged across the board, but especially on the long-end of the yield curve, but the Dollar Index (DXY) barely budged, as the global dollar shortage persists. Overseas equities also finished the day lower, with European stocks, in particular being under siege due to the gloomy economic outlook.
Anticipated Stimulus Package Gets Delayed
While the key index futures surged higher by almost 10% in pre-market following the Fed’s announcement, the fact that the highly anticipated stimulus package got delayed weighed heavily on equities throughout the session. The Fed’s steps failed to calm global currency and credit markets and the dollar’s strength was especially pronounced against emerging market currencies, with several of them crashing to new all-time lows again. U.S. credit markets diverged substantially too, as even down investment-grade bonds rallied strongly, high-yield credit continued to plunge, which could more pressure on the financial sector.
We will have a busy day of economic releases tomorrow, even though investors will likely continue to ignore them due to the virus-related headlines. It will be interesting to compare the Markit manufacturing and services PMI’s to the global PMI’s, while the Richmond Manufacturing Index will provide more information about the struggling sector. Analysts expect all three ‘soft’ measures to signal contraction, while new home sales are also expected to drop, even without the direct impact of the pandemic. Stay tuned!